On Tuesday, the Single European currency turned out to be in high turbulence zone as already in the first part of the day the investors had started selling the euro, but on the North-American session, the pair jumped sharply upwards, having increased from an annual minimum of 1.2111 and having reached a high at 1.2349. The trades closed in favor of the US dollar, which strengthened by 97 points against the euro. The trading volatility amounted to 240 points.
Fundamental analysis:
The sovereign debt crisis of the Eurozone, which can do harm to the global economy recovery, and the growth of unemployment rate in the Eurozone have exerted strong pressure on the European currency.
The Eurozone unemployment rate rose to the highest level almost in 12 years again in April. According to Eurostat, the unemployment rate surged to 10.1% versus 10.0% in March, while economists were expecting the unemployment to remain at the level of 10.0%.
The number of unemployed persons gained by 25 000 to 15.9 mln.
The labor market of Germany continues gradual recovering. As the Federal labor office said, the number of unemployment persons declined by 45 000 in May, while in April this reading dropped by 67 000. The seasonally adjusted unemployment rate was 7.7% in May following 7.8% in April.
The expert predictions were the decrease of 17 500 unemployed persons and unemployment rate to remain unchanged.
The euro got a slight support after the statement of the European Commission Chief José Manuel Barroso, who said on Tuesday that he has no doubts regarding the euro future. “We have no doubts in the future of the euro. The euro is one of the most steady currencies in the world”, – declared Barroso during an interview at the summit Russia–EU in Rostov-on-Don.
“The European leaders firmly announced about their intention to do the best to provide the euro stability and it was really reached”, – added the European Commission Chief.
Despite the rising worries about the Eurozone debt crisis, the US economy recovers further after recession and Yesterday’s reports confirm that.
The construction spending in the USA increased in April and the commercial property market showed a growth. According to the US Commerce department Tuesday’s reports, the seasonally adjusted construction expenses moved up by 2.7% to $869.09 bln. per year in April, while economists were expecting the spending to remain unchanged.
Manufacturing ISM declined to 59.7 points in May after 60.4 in April, however, it turned out to be higher than expert forecasts.
The employment index rose to 59.8 points in May following the reading of 58.5 in April and new orders index left unchanged at the mark of 55.7 points.
Technical analysis:
A sharp plummet of the European currency to a 4-year low at 1.2111 provoked technical correction of the pair yesterday afternoon. Now, the trading is held in a wide diapason of the rising price channel, which has started from the yesterday’s low and the upper limit lies at 1.2350 area.
The pair is also trading at 1.2251 area, where the 50 day exponential moving average is placed, which restrain its growth.
For renewal of more steady uprising movement, the euro needs to close above the bottom of the 23rd figure, from which the growth can last to the yesterday’s high and then reach the level of 1.2390.
In case of the drop below the level of 1.2181, the way to the yesterday’s low will be open for the pair and to the low of 1.2060 from 12 April 2006 after.
Bollinger bands after yesterday’s peak movement point out very high liquidity on the market, however, the bands are parallel that speaks for that the pair is on a short pause ahead a new aggressive spike. The trading is driven in the lower part of the channel and the mid-band, placed at 1.2233, is a dynamic resistance.
MACD did not managed to leave the purchase zone, which indicated the pair tending to continue its fall.
Today’s recommendations:
Support levels: 1.2181, 1.2110, 1.2060.
Resistance levels: 1.2261, 1.2312, 1.2350.
Today it is advisable to buy the pair at 1-hour timeframe closing above the level of 1.2263 with a target – T/P 1.2338 and S/L 1.2219.
It is possible to sell at the closing of 1-hour timeframe below 1.2183 with a target – T/P 1.2107 and S/L 1.2225.
More analysis at instaforex.com